Pushing boundaries in innovation and technology - Covestro
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If you do not take this copy of our presentation, we are glad to reuse it on another occasion. This presentation is available for download at https://investor.covestro.com/en/presentations Pushing boundaries in innovation and technology Conference presentation covestro.com 2019│ Innovation and Technology @ Covestro
WHY IS INNOVATION AND TECHNOLOGY LEADER- SHIP IMPORTANT? 2 2019 │ Innovation and Technology @ Covestro
Inventor and leader in high-tech material solutions
Covestro at a glance
€14.6bn #1 4.1% 16,770 €276m
Sales Global producer of PU Core volume growth Employees R&D expenses
2018 and its derivatives as CAGR 2015-2018 (in FTE) 2018 2018
well as PC(a)
Sports / Leisure,
Automotive /
Cosmetics, Health,
Polycarbonates, Polyurethanes, APAC EMLA Transportation
diverse industries
PCS PUR 20%
28% 26%
33%
43%
51%
8% 18%
Wood/
Coatings, Chemicals Furniture
Adhesives, 16%
12%
Specialties, 5% 24% 16%
CAS
NAFTA Electrical/
Other Electronics
Construction
3 2019 │ Innovation and Technology @ Covestro Notes: (a) Based on total combined nameplate capacity for MDI, TDI and polyether polyols at year end 2018 as per Covestro estimates
Materials and systems for rigid and flexible foams
Polyurethanes (PUR) at a glance
#1 1,000 3.8% €7.4bn €1.0bn
Producer globally and Polyols grades Core volume Sales FOCF
inventor of PU(a) for differentiation CAGR in 2015-2018(b) 2018 2018
Cold chain Construction Cost leadership Comfort Automotive Sustainability
e.g. refrigerator e.g. metal panel e.g. process e.g. furniture e.g. instrument e.g. CO2-based
technology upholstery panel polyether polyols
4 2019 │ Innovation and Technology @ Covestro Notes: (a) Based on total combined nameplate capacity for MDI, TDI and polyether polyols at year end 2018 as per Covestro estimates
(b) Adjusted prior-year figures to reflect the transfer of the specialty elastomers business from the Polyurethanes segment to the CAS
segment as of January 1, 2018
Engineering thermoplastic with unique combination of properties
Polycarbonates (PCS) at a glance
#1 1,000 6.1% €4.1bn €468m
Producer globally and PC grades for Core volume Sales FOCF
inventor of PC(a) broadest offering CAGR in 2015-2018 2018 2018
Mobility Electronics Consumer Electrical Mobility Healthcare
e.g. exterior e.g. robot housing electronics e.g. LED street e.g. charging e.g. drug delivery
e.g. adapter lamp station
5 2019 │ Innovation and Technology @ Covestro Notes: (a) Based on nameplate capacity at year end 2018 as per Covestro estimates
Performance materials for coatings, adhesives and specialties
Coatings, Adhesives, Specialties (CAS) at a glance
#1 2,700+ 3.3% €2.4bn €203m
Producer globally of Products based Core volume Sales FOCF
aliphatic isocyanates primarily on 6 monomers CAGR in 2015-2018(b) 2018 2018
and PU dispersions(a)
Ingredients for Ingredients for Ingredients for
surface coatings adhesives and sealants specialties
6 2019 │ Innovation and Technology @ Covestro Notes: (a) Based on nameplate capacity at year end 2018 as per Covestro estimates
(b) All figures adjusted to reflect the transfer of the specialty elastomers business from the Polyurethanes segment to Coatings,
Adhesives, Specialties segment as of January 1, 2018 as well as termination of trading activities and reduced contract manufacturing
Covestro set to outpace global growth
Structural growth drivers
Trends … and needs … lead to demand for Covestro products
Climate Renewable energy Core volume growth
change
Lower energy buildings CAGR 2018-2023e
Urbani- Energy-efficient lighting
~4%
zation
Sustainable living
Population & Functional clothing
prosperity growth Global GDP
Food preservation
CAGR
2018-2023(a)
Increasing Goods transport
mobility
Conventional & E-vehicles 2-3%
7 2019 │ Innovation and Technology @ Covestro Notes: (a) Covestro estimate
Industries grow above global GDP
Structural growth drivers
UN SDGs(a) Needs to be served Industry demand outlook(b) 2018e – 2023e
related to climate change: ('000kt) CAGR
• Zero emission concepts 17.6 4-5%
~21.9
• Low-energy buildings
PU(c)
related to increasing mobility: 2018e 2023e
• Energy-efficient mobility
• Lightweight transportation CAGR
• E-mobility, autonomous driving ~5.5
4.5 ~4%
PC
related to growing population:
• Food preservation
• Low-cost durable goods 2018e 2023e
• Medical applications
CAGR
~4.2
related to increasing urbanization: 3.4 ~4%
CAS(d)
• Affordable housing
• Living comfort
• Public infrastructure
2018e 2023e
8 2019 │ Innovation and Technology @ Covestro Notes: (a) Most impacted goals out of 17 Sustainable Development Goals, set by the United Nations’ “2030 Agenda for Sustainable Development”
(b) Assumes global GDP CAGR 2018–2023e of 2-3% as per Covestro estimates; (c) Comprises MDI, TDI and polyether polyols
(d) Shows PU raw materials industry demand in coatings, adhesives and sealants (excl. architectural/textile coatings and solvent-borne polyacrylates);
additionally TPU, elastomers and PC/TPU films
80 years of ideas and research
Inventions at Covestro
1953 1982 2001 2015
Hermann Schnell Introduction of Construction First coating hardener
invents 1962 CDs made of begins at the made of renewable
polycarbonates polycarbonate Covestro world- raw materials is
Market launch scale produc- introduced
of rigid 1995 tion site in
polyurethane 1985 Shanghai,
Films based on
foam for First office China
insulating machines
polycarbonate 2017
1954 refrigeration made of
are introduced
2013 Key
Kuno Wagner systems flame-
for security 2011 TCG company
chemical
documents Epoxy resins replaced acquired in order
invents cross- retardant Plant in aniline won
linking agent by polyurethane resins to expand market from
polycarbonate Shanghai in wind turbine rotor position in
for lightfast composite equipped with thermoplastic fiber renewable
polyurethane Polycarbon- blades raw
eco-friendly composites
coatings ate used for and efficient materials
the first time gas-phase for the first
in automo- phosgenation time
tive head- 1998 technology 2014
lamps 1991
1967 First Introduction 2019
1959 Introduction automo- 2012 of INSQIN® Covestro
1937 Presentation of polyure- tive Introduction of technology 2016 Direct Store,
Otto Bayer Introduction of the first thane glazing for microcellular for a water- a digital
invents of car made “memory” the rear foam with based Start of production of sales
polyure- polyurethane almost foam for window of improved polyurethane foam components channel,
thanes in the fashion entirely of mattresses the Smart insulating textile with CO2 in launched
industry plastic properties coating Dormagen, Germany
9 2019 │ Innovation and Technology @ Covestro
Innovation and technology leadership secure profitable growth
Covestro key investment highlights
Above GDP volume growth
driven by innovation and sustainability trends, also embodied by non-financial targets
Leading and defendable global industry positions
as innovation and cost leader
More than half of sales generated by resilient businesses
supporting value-creating base earnings
Management focus on driving efficiency
with streamlined structures to better adapt to market needs, focus on cost discipline and new incentive targets
Use of cash focused on shareholder value
with commitment to progressive dividend policy and focused capex for best value-creation
10 2019 │ Innovation and Technology @ CovestroHOW DO WE INNOVATE AND CONTINUE TECHNOLOGY LEADERSHIP? 11 2019 │ Innovation and Technology @ Covestro
WHY IS INNOVATION AND TECHNOLOGY LEADERSHIP IMPORTANT? 12 2019 │ Innovation and Technology @ Covestro
Non-financial ambition supports growth strategy
Covestro non-financial targets 2025
Our R&D project portfolio is aligned with UN Sustainable Development Goals
100% of suppliers compliant with our sustainability requirements
Reduce specific greenhouse gas emissions by 50% by 2025
Ten million people in underserved markets benefit from our business solutions
Getting the most out of carbon
13 2019 │ Innovation and Technology @ CovestroThinking in full life cycles
Sustainability along the value chain
Global trends R&D Raw materials Production Products to markets
R&D resources More sustainable input Cost efficiencies by energy-efficient process Address customer needs for more sustainable
allocated based addressing solutions (e.g. lightweight, durable, bio-based)
on benefits for: customer needs Specific CO2e emissions(b)
• People and profit improvement: t CO2e / t
Reduction by 38% Examples:
0.69
• Planet • INSQIN®, artificial leather
Examples: 0.39
• Profit • Desmodur® Eco, coating hardener
• C1 feedstock
(e.g. CO2) • Baytherm® Microcell, insulation foam
2005 2018
• Bio-based feedstock • Makrolon®, e.g. LED lighting
(e.g. BDO(a)) Specific energy consumption(c)
• Low carbon energy MWh PE / t
Reduction by 36%
2.19
1.41
2005 2018
14 2019 │ Innovation and Technology @ Covestro Notes: (a) BDO refers to 1,4-butanediol
(b) Specific greenhouse gas emissions: metric tons of CO2 equivalents per metric ton of production volume
(c) Energy efficiency: quotient of equivalent primary energy and in-spec production volume at our main production sitesMaking wind power plants more efficient
Climate change: renewable energy
Trend Need Market Covestro contribution
Climate More durable and economical wind power
change Energy Novel components for wind power plants
plants
Energy • Rotor blades: Polyurethane resins for more
consumption(a) stability and durability
CAGR: ~3%
• Towers:
Polyurethane materials for anti-corrosion
Offshore wind coatings
energy(b)
• Undersea cables: Elastomers for protection
CAGR: ~19% systems
15 2019 │ Innovation and Technology @ Covestro Notes: (a) BP, Energy Outlook, 2017 for 2015 – 2020 based on million tons oil equivalent
(b) Navigant, World Wind Energy Market Update, 2017, for 2016 – 2021 based on mega wattLowering CO2 footprint of furniture
Urbanization: sustainable living
Trend Need Market Covestro contribution
Bio-based hardener for water-based,
Urbanization Eco-friendly produced furniture Furniture
industrial furniture coatings
Coating industrial • Bayhydrol® eco UV 2877 combines higher
furniture market(a) productivity with ecological advantage
CAGR: ~3% • Drying up to 50% faster than a high-
performance standard product thanks to a
Water-based multi-curing mechanism
industrial furniture
• Around 35% of the product is based on
market(b)
biomass, contributing to circular economy
CAGR: ~5% by helping to close the carbon loop.
• LCA shows significant improvement in
Renewable carbon footprint compared to standard
feedstock waterborne UV curable dispersions.
share
~35%
16 2019 │ Innovation and Technology @ Covestro Notes: (a) CSIL January 2017 for 2017 - 2021
(b) Covestro estimatesReplacing harmful by water-based ingredients
Population and prosperity growth: sustainable fashion
Trend Need Market Covestro contribution
Population & Waterborne, solvent-free materials for
prosperity growth Sustainable and functional fashion Textile industry
functionalized textiles
Textile coating • INSQIN® helps customers to meet their
market(a) sustainability goals, e.g. through a ~45%
CAGR: ~6% lower carbon footprint than that of solvent-
based systems
Covestro relevant • Chemical and mechanical resistance at
textile coating same excellent levels
market(b)
• INSQIN® technology also includes a
CAGR: ~11% waterborne PU dispersion that is
biologically degradable by microorganisms
Global at the end of the product life cycle
warming • Enabling customers to offer biodegradable
potential(C) coatings and composite solutions for textile
–45% coating
17 2019 │ Innovation and Technology @ Covestro Notes: (a) IAL PUD market report 2015 for 2014 – 2019
(b) Covestro estimates
(c) Measured in CO2 equivalents, comparing textile coatings made using INSQIN® technology vs solvent-based systemsEnabling efficient E-mobility and autonomous driving
Increasing mobility
Trend Need Market Covestro contribution
Increasing
mobility Reduced weight and new functionalities Automotive Pioneering all-around material concept
Global car • Efficient thermal management to reduce
production(a) energy demand
CAGR: ~3%
• New lighting functions
• Integrated light and signal elements,
Global hybrid and sensors, antennas
electrical car • Vehicle-to-environment communication
production(a) • Entirely new possibilities in design
CAGR: ~34% • Surfaces with integrated features: Displays,
touch screens for multiple styling options
and brand differentiation
• Most stringent weight reductions
18 2019 │ Innovation and Technology @ Covestro Notes: (a) LMC 2019 for 2018 – 2023WHY IS INNOVATION AND TECHNOLOGY LEADERSHIP IMPORTANT? 19 2019 │ Innovation and Technology @ Covestro
Leading chlorine technology reduces energy consumption
Use of energy-efficient process technology
Trend Need Market Covestro contribution
Climate
change Energy-saving processes Chlorine NaCl electrolysis with ODC(b)
Reduced • Energy usually accounts for about one third
electricity of the production costs for chlorine
consumption(a) • Covestro and ThyssenKrupp Uhde
~25% Chlorine Engineers developed proprietary
technology
• Use of an oxygen-depolarized cathode
(ODC) consumes around 25% less energy
than conventional electrolysis
• Significant economic and ecological
benefits vs conventional processes
• World-scale ODC chlorine plant planned in
Tarragona, Spain
20 2019 │ Innovation and Technology @ Covestro Notes: (a) Compared to conventional processes
(b) NaCl = Sodium Chloride; ODC = Oxygen Depolarized CathodeGas-phase phosgenation reduces energy consumption
Use of energy-efficient process technology
Trend Need Market Covestro contribution
Climate
change Energy-saving processes Isocyanates TDI / HDI gas-phase phosgenation
Reduced • Proprietary process technology significantly
consumption increases plant throughput
of electricity(a) • Reaction time for gas-phase phosgenation
~60% process is shorter than conventional
process
Reduced • Reduced capex by 20% as plant size for a
phosgene given capacity is smaller
holdup(a) • Reduced conversion cost due to lower
~40% energy demand and reduced solvent usage
21 2019 │ Innovation and Technology @ Covestro Notes: (a) Compared to conventional liquid phase phosgenationUsing CO2 to produce foam raw materials
Use of alternative raw materials
Trend Need Market Covestro contribution
Climate
change Substitutes for fossil feedstock PU foams Use industrial waste CO2 to produce polyols
CO2 share • CO2 replaces up to 20% of crude oil-based
of weight feedstock of polyols
≤20% • New production plant at Dormagen site and
product brand cardyon® launched
• Recticel promotes foam mattresses with
more than one-seventh of oil content
replaced by CO2-based chemicals
• Sports flooring producer Polytan installed
first elastic subfloor using CO2-based
cardyon® as binder
• More CO2-based products in development
for applications in sport, appliances, etc.
22 2019 │ Innovation and Technology @ CovestroTurning waste gas from steel factories into valuable plastics
CO2 as alternative carbon source
Industry consortium Carbon4PUR Pan-European project partners
• Cross-sector project of 14 partners from seven countries, led by Covestro, funded
by the European Union
• Goal to make more use of alternative carbon sources like CO2 in order to close the
carbon loop and save direct fossil resources such as crude oil
• Dedicated research how to use flue gas from the steel industry to replace oil-based
raw materials – in a particularly efficient and sustainable way
Academic and institutional partners
• To date, the project has shown first promising results: Test quantities of polyol
intermediates have been obtained both from CO and CO2
• Industrial-scale testing: In future, carbon in form of mixed waste gases from the
ArcelorMittal plant in Fos-sur-Mer, France, could undergo catalytic transformations
in the nearby Covestro plant to become a chemical feedstock for polyols
23 2019 │ Innovation and Technology @ CovestroWHY IS INNOVATION AND TECHNOLOGY LEADERSHIP IMPORTANT? 24 2019 │ Innovation and Technology @ Covestro
Enabling to seize new opportunities in multiple dimensions
Digitalization at Covestro
Digital operations Digital customer experience Digital business model
• Innovate how to do daily business cost • Innovate how to grow current business • Innovate how to make business
efficiently and more safely • Digitalize the customer and supplier • Develop new, digital business models
• Digitalize business operations approach • Utilizing digital technologies to enhance
• Digital, fully integrated and data-based • Reflecting needs of digital savvy customer and own benefits
approach allows to work more safely and customers and supporting their decision
efficiently making across multiple digital
touchpoints
25 2019 │ Innovation and Technology @ CovestroDigitalization to increase operational efficiency
Dimension I – Digital operations
Predictive maintenance Computational chemistry Digital twin
• Consistent data model and workflows • High performance computing for • iPEP (Integrated plant and
for fast deployment efficient research and development engineering platform) to provide
processes virtual image of existing plants,
• High degree of horizontal and vertical
including all systems and processes
data integration • First product developed with support of
• Increased plant runtime, reduced computational chemistry launched in • One of 11 projects to enable more
maintenance costs as well as appliance application efficient planning, operation and
optimized replacement and service • Shortened time to market and reduced maintenance of plants
intervals resources for experimental work • Pilot project planned in Caojing
26 2019 │ Innovation and Technology @ CovestroSuitable touchpoints for every requirement
Dimension II – Digital customer experience
Digital customer journey Highlights
• The online Customer Lounge combines
all tools related to product search and
ordering
• The online Product Finder can also be
accessed via the Customer Lounge
where customers can efficiently search
for suitable products
• Revised global E-ordering platform
"Order@Covestro“ to place an order
easily online
• Status of purchase order, time of
delivery or invoice information can be
accessed by customers at every time
27 2019 │ Innovation and Technology @ CovestroDigital channel fills “24/7 direct and tailored“ business gap
Covestro commercial channels
Field sales / KAM(a) Inside sales Covestro Direct Store E-Market place Distribution
Covestro interacts with and sells to customer directly Offer context deter- Covestro without direct
and determines all elements of the offering mined by 3rd party customer access
• Relationship • Remote sales force • New selling and • External platforms • One-stop shop for
managers with focus working primary via buying features 24/7, with multiple, customers with
on business email and phone private, protected, competing suppliers, multiple services
development tailored e.g. 1688.com
• Efficiently manage • Long tail customers
• Protect and nurture standard product • Offer new e-com- • Leads and new direct who do not interact
business relations business with smaller merce possibilities to business in long tail with us directly
with large accounts accounts who prefer “digital-minded” with customers who
who require key to speak to someone sellers and buyers, like platform
account/ sales initially for standard standards
coverage products
28 2019 │ Innovation and Technology @ Covestro Notes: (a) KAM = Key Account ManagementDigital sales channel expands e-commerce opportunities
Dimension III – Digital business models
Highlights
• Covestro Direct Store launched in March
2019, hosted on Asellion platform
• Customers to purchase chemical
products conveniently, flexibly and
securely at current market prices
• Adapted buying experience to changed
customer requirements, offering new
methods in addition to existing digital and
analog sales channels
• Customers to receive regular
personalized offers at clear real-time
conditions
• Covestro to benefit from additional,
personalized digital doorway to
customers
29 2019 │ Innovation and Technology @ CovestroDigital trading platform Asellion open to third parties
Dimension III – Digital business models
Scalable software solution for third party providers Highlights
• Covestro Direct Store as first supplier
store on the Asellion platform
• Asellion platform technology designed as
a scalable and secure software-as-a-
service (SaaS) solution
• In future, third party providers and other
manufacturers have option to host their
own direct store powered by Asellion
• After ongoing test and development
phase, platform to open for external
providers during 2019
• Asellion is a wholly owned subsidiary of
Covestro, based in Amsterdam
30 2019 │ Innovation and Technology @ CovestroPUSHING BOUNDARIES IN INNOVATION AND TECHNOLOGY IS AT THE CORE OF COVESTRO 31 2019 │ Innovation and Technology @ Covestro
Disclaimer This presentation may contain forward-looking statements based on current assumptions and forecasts made by Covestro AG. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of the company and the estimates given here. These factors include those discussed in Covestro’s public reports, which are available on the Covestro website at www.covestro.com. The company assumes no liability whatsoever to update these forward-looking statements or to adjust them to future events or developments. 32 2019 │ Innovation and Technology @ Covestro
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